Bloomberg News

Barclays Takes 8.2 Billion Euros of ECB Three-Year Money

March 02, 2012

A logo hangs outside a Barclays Plc bank branch in London. Photographer: Simon Dawson/Bloomberg

A logo hangs outside a Barclays Plc bank branch in London. Photographer: Simon Dawson/Bloomberg

Barclays (BARC) Plc, the U.K.’s third- largest lender by assets, took 8.2 billion euros ($10.9 billion) of three-year loans from the European Central Bank to provide “funding stability” for its units in Spain and Portugal.

Barclays will get 6.2 billion euros from the auction through Banco de Espana on Feb. 29 and the remaining 2 billion euros will be gained through Banco de Portugal, accepting money from the plan for the first time, London-based Barclays said in a statement today.

“The funds provided through this facility will be used to manage the risk associated with mismatches between Barclays euro-denominated assets and deposits in markets where Barclays has significant local operations,” Barclays said in the statement.

The European Central Bank is providing the region’s banking system with cheap money in an effort to avert a credit crunch after the market for unsecured bank debt seized up last year and funding from U.S. money markets disappeared. ECB President Mario Draghi encouraged lenders to use the Longer-Term Refinancing Operation, saying on Feb. 9 there is “no stigma” in using the facilities.

Money made from the loans won’t be used to pay employees, Barclays said.

Lloyds Banking Group Plc (LLOY), Britain’s second-biggest taxpayer-assisted lender, said on Feb 29 that it took 11.4 billion pounds of three-year loans from the ECB. HSBC Holdings Plc, Europe’s biggest bank, also said last month that it would take about 350 million euros of loans at the auction after getting 5.2 billion euros previously.

Barclays said it didn’t accept loans offered by the ECB on Dec. 21, an auction with fewer participants.

In the second auction 800 banks took 529.5 billion euros from the Frankfurt-based central bank, compared with 489 billion euros handed to 523 institutions in the first auction.

“Any bank that doesn’t worry about issues of stigma given what we’ve been through over the last three or four years - of course, we have to think about brand and reputation,” Chief Executive Officer Robert Diamond told analysts on Feb. 10. when asked whether there was a stigma attached to taking the loans. “In our case, being rock solid in funding, capital and liquidity is our number one priority.”

Any bank in the region could borrow an unlimited amount, provided it pledged eligible collateral. Lenders won’t face curbs on bonuses or dividends, according to the ECB.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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